Agenda and minutes

To note the attendance at this meeting of any duly appointed Reserve Members.

RESOLVED:  To note that there were no Reserve Members in attendance.

Colin Cartwright of Aon informed the meeting that his colleague, Max Meikle, had resigned from Aon.  The Chair asked for the Committee’s thanks for his contributions to the Committee to be passed on along with best wishes for his future endeavours.

To receive declarations of disclosable pecuniary or non pecuniary interests, arising from business to be transacted at this meeting, from all Members present.

RESOLVED:  To note that no declaration of interests were made at the meeting.

To consider the appointment of a Vice-Chair to the committee for the 2023/24 Municipal Year.

RESOLVED:  Councillor Nitin Parekh be appointed Vice-Chair of the Committee for the 2023/24 Municipal Year.

That the minutes of the meeting held on 29 March 2023 be taken as read and signed as a correct record.

RESOLVED:  That the minutes of the meeting held on 29 March 2023, be taken as read and signed as a correct record.

To note any public questions received.

Questions will be asked in the order in which they were received.  There will be a time limit of 15 minutes for the asking and answering of public questions.

[The deadline for receipt of public questions is 3.00 pm, 26 July 2023.  Questions should be sent to publicquestions@harrow.gov.uk  

No person may submit more than one question].

RESOLVED:  To note that no Public Questions were received.

To receive petitions (if any) submitted by members of the public/Councillors.

RESOLVED:  To note that no petitions were received at the meeting.

To receive deputations (if any).

RESOLVED:  To note that no deputations were received at the meeting.

Report of the Director of Finance and Assurance.

Members received an introduction to the report of the Director of Finance and Assurance which gave the following highlights.

As at 31 March 2023, the overall value of the fund had increased by £27m to £955m over the quarter.  The fund underperformed the benchmark by 0.5% over the quarter, returning 2.8% against the benchmark return of 3.4%.  For the 12 months to end of March, the fund underperformed the benchmark by 0.4 %, reducing the value of the fund over the year by £63m.  By the end of June, despite the volatility experienced in markets, the fund value had appreciated to £969m.

An officer informed the Committee that the Pension Board had reviewed the risk register and governance compliance statement at their last meeting.  Officers had hoped that the Annual Report and Accounts for 2021-22 could be concluded in July, but issues were raised following the triennial valuation as the auditor’s test of the membership data had highlighted issues with 3 out of a random sample of 14 accounting items.

The officer said that the results of the McCloud and Pooling Consultations had been received and the Committee would be updated via a briefing note in future on what further actions were being taken by other funds.

Members asked the following questions:

The Chair expressed concerns that 3 out of 14 represented a high percentage of the sample and asked if the Acting Director of Finance was aware of the situation and how it would be resolved.  The officer gave further explanations and confirmed that the Acting Director of Finance had been informed.  Mazars had advised that the valuation should be rerun but the Fund’s Actuary was of  the view that the same issue was being experienced by other funds and could be sorted out by the accounting department.  Officers were awaiting further updates from the Fund’s actuary.  The Chair requested that the Members of the Committee and Advisers be updated on the situation as this was unsatisfactory.

The Chair asked the Aon representative why inflation was shown at 3.6% in Aon’s report.  The Aon representative explained that this was a 20 year long term inflation rate estimate and was forward-looking and derived from financial market data.

A Member asked if the members of the pension fund were given any valuation information along with their P60.  The officer was uncertain and said that she had suggested to the Pension Board that an Annual General Meeting (AGM) could be scheduled online, and members of the fund could be given an update on the value of the fund on that occasion.

The Chair asked the Aon representative for his view on the PIRC ranking on page 36 of the agenda.  The Aon representative said that while it was very disappointing, what was more important was how the fund performed versus the strategic benchmark.  This defined what the Committee was trying to achieve in the longer term.  Over shorter periods of time, performance versus the peer group could be very different, depending on  ...  view the full minutes text for item 52.

Report of the Director of Finance and Assurance.

Members received a brief introduction to the report of the Director of Finance and Assurance.  This report reviewed the Pension Fund’s Governance Compliance Statement.

The officer informed Members that the document was last reviewed by the Committee on 19 September 2022 and by the Pension Board on 12 July 2023.  The Pension Board had asked that the report be amended to reflect that the Board had no delegated functions from the Council but from The Pension Regulator (TPR).

The officer explained that the appointment of the UNISON Trade Union Observer and forthcoming appointment of the Trade Union Observer from GMB would make the Committee fully compliant in regards to point (b) of  Principle A – Structure on page 55 of the Agenda which required  that representatives of participating LGPS employers, admitted bodies and Scheme members (including pensioner and deferred members) be appointed as  members of either the main or a secondary committee established to underpin the work of the main committee.

An Independent Advisor pointed out that there was no co-optee and that the investment adviser and the independent investment advisers were not Members of the Committee.  This was agreed and the text on page 51 of the agenda should be changed accordingly.

RESOLVED:  That

(1)            The latest position on the LGPS Good Governance Review be noted.

(2)            The updated Governance Compliance Statement be approved for adoption subject to the following amendments:

·         The amendment of “Chief Executive” to “Managing Director” and the delegation of functions 6 and 7 on page 52 of the agenda to the Director of Finance and Assurance.

·         The Membership structure of the Committee on page 51 of the agenda to be changed to exclude a co-optee, the Investment Adviser and the Independent Investment Advisers.

Report of the Director of Finance and Assurance.

Members received a brief introduction to the report of the Director of Finance and Assurance.  The report set out the updated Pension Fund Risk Register for Members to review and comment accordingly.

The Chair asked what the significant changes from the last risk register report were.  The officer explained that she would circulate this information after the meeting.  The Chair asked that the report be presented again together with this information at the next meeting of the Committee.

The officer informed the committee that she would also update the register to reflect the comments of the Pension Board that cyber risk should be included in the risk register.

An Independent Advisor asked what actions would be taken to address the fact that liquidity risk had increased as stated on page 72 of the agenda now that the Fund was slightly cash flow negative and was more negative than in   April 2023.  The officer explained that there was no imminent risk as the Fund had over £11m in its cash account which was sufficient and furthermore liquidity needs had been taken into account in determining investment strategy.  This topic would also be discussed in part II of the meeting.  The Aon representative explained that even though cashflow was negative, enough operational cash was available from liquid assets if needed.  He said the proposed investment strategy was based on it being worthwhile to increase the Fund’s illiquid assets as they had a higher return potential.

The other Independent Adviser suggested that as all the Fund’s London CIV assets were non distributing, it might be good to make one or two of them distributing assets to improve liquidity and this should be raised with the London CIV.  It was agreed that this should be an action point.

RESOLVED:  That

(1)            the report be noted and risk register be noted;

(2)            a further report be brought back to the next meeting of the Committee detailing any significant changes between the previous and updated Risk Register;

(3)            the London CIV should be approached with regard to distributing assets.

Appointment of Trade Union Observer

RESOLVED:  That Mr John Royle be appointed as the UNISON Trade Union Observer for the 2023/24 Municipal Year.

To resolve that the press and public be excluded from the meeting for the following item of business for the reasons stated.

RESOLVED:  That, in accordance with Part I of Schedule 12A to the Local Government Act 1972, the press and public be excluded from the meeting for the following items of business, for the reasons set out below:

Report of the Director of Finance and Assurance.

The Committee received confidential appendices to the Performance Dashboard and Update on Regular Items report.  An Independent Adviser, Aon Representative and the officer undertook to answer questions raised during the discussion.

Members agreed the details and attendees for the Meet the Manager Day in October.  The officer undertook to arrange the details and invite the agreed fund managers.

(See also Minute 52).

Report of the Director of Finance and Assurance.

The Committee received a report on the Review of Investment Strategy from the Investment Adviser.  The Investment Adviser answered questions from Members.

RESOLVED:  The Committee was recommended to consider the report and:

(1)            approved 5% allocation of the Fund assets to Private Debt and reduction of Multi Asset Credits (MAC) allocation by 5%, delegating authority to Section 151 Officer following consultation with the Chair of the Pension Fund Committee to implement the agreed actions;

(2)            approved reduction in the Diversified Growth Fund (DGF) by 3% and the proceeds to be use as a source of funding of illiquid assets, delegating authority to Section 151 Officer following consultation with the Chair of the Pension Fund Committee to implement the agreed actions;

(3)            the Section 151 Officer to engage the Fund Investment Consultant (Aon) to determine possible alternatives to the current Diversified Growth Fund (DGF) and the identified alternatives to be submitted at the next Committee meeting.